Trump Cabinet Calls on States to Eliminate Certificate of Need Laws

By Alex Spanko | December 4, 2018

Three prominent members of the Trump administration called on individual states to eliminate Certificate of Need (CON) laws regarding the development of new health care facilities — including nursing homes — characterizing the statues as anti-competitive and detrimental to consumers.

Writing in a sweeping, nearly 120-page report on health care reform, the secretaries of the Health and Human Services, Treasury, and Labor departments — Alex Azar, Steven Mnuchin, and Alexander Acosta, respectively — accused states of holding back innovation in health care with the laws, which generally require providers to receive specific permission from the government before building new hospitals, skilled nursing facilities, and other sites of care.

“States should consider repeal of Certificate of Need (CON) statutes or, at a minimum, significantly scale back the scope of their CON regimes, for example by ensuring that competitors of CON applicants cannot weigh in on these applications,” the secretaries wrote.

Currently, 38 states and the District of Columbia have some type of CON law, according to a report from the National Conference of State Legislatures — including newcomer Indiana, which just enacted CON legislation in July. Proponents of such laws argue that a competitive, free-market model doesn’t work for health care services, and that limiting the number of providers helps curb costs; detractors, including the Trump administration officials, say the model harms consumers and actually boosts spending on health care services.

“CON laws can restrict investments that would benefit consumers and lower costs in the long term and are likely to increase, rather than constrain, health care costs,” the secretaries argued. “This is because CON regimes impose the legal and regulatory costs of preparing an application, then seeing that application through an often-lengthy approval process and potential third-party challenges.”

In the skilled nursing world, CON laws represent significant barriers to entry for newcomers in certain marketplaces, but also serve to keep census robust: Unlike the senior housing and memory care industries, which have suffered an oversupply of beds in recent years, skilled nursing has remained immune in part due to the effects of CON laws, National Investment Centers for Seniors Housing & Care (NIC) senior principal Bill Kauffman told SNN back in September.

But the cabinet members claim that the laws restrict access to health care for rural Americans, with limited evidence that capping the allowable number of beds produces better outcomes.

“CON proponents have argued that CON laws support policy goals relating to healthcare quality and access. However, CON laws would be an indirect — and likely inefficient — way to achieve these goals,” they wrote. “Moreover, the evidence suggests CON laws are ineffective. There is no compelling evidence suggesting that CON laws improve quality or access, inefficiently or otherwise.”

Telehealth potential

Azar, Mnuchin, and Acosta also called on states and the federal government to expand coverage of telehealth services — joining a growing chorus of both government officials and providers that see potential in the technology.

Under current rules, Medicare can only cover telemedicine in rural nursing homes, though the Centers for Medicare & Medicaid Services (CMS) recently issued a proposed rule that would allow Medicare Advantage plans to pay for remote health technology regardless of location.

“Congress should consider proposals modifying geographic location and originating site requirements in Medicare fee-for-service that restrict the availability of telehealth services to Medicare beneficiaries in their homes and in most geographic areas,” the secretaries wrote in their report, adding that states should also adopt laws that allow telemedicine providers to more easily operate across multiple states.

The HHS, Treasury, and Labor departments compiled the report as required under Executive Order 13813, which President Trump issued in order to further “the development and operation of a health care system that provides high-quality care at affordable prices for the American people.” The departments considered 262 comments collected from interested stakeholders, as well as the input of a working group consisting of members from multiple federal agencies.

Alex covers the long-term health care industry for Aging Media Network, with a specific interest in the intersection of finance and policy. Outside of work, he reads nonfiction, experiments in the kitchen, enjoys pretty much any type of whiskey or scotch, and yells at Mets games — often all at the same time.

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